Asked by Savannah Calkins on May 20, 2024
Verified
Foster Florist specializes in large floral bouquets for hotels and other commercial spaces. The company has provided the following data concerning its annual overhead costs and its activity-based costing system: 
Distribution of resource consumption:
The "Other" activity cost pool consists of the costs of idle capacity and organization-sustaining costs.The amount of activity for the year is as follows:
What would be the total overhead cost per delivery according to the activity-based costing system? In other words, what would be the overall activity rate for the deliveries activity cost pool? (Round to the nearest whole cent.)
A) $27.00
B) $26.50
C) $30.00
D) $24.00
Activity-based Costing
Activity-based costing involves identifying and assigning costs to overhead activities and then assigning those costs to products or services based on their consumption of those activities, offering detailed insights into cost drivers.
Floral Bouquets
Arrangements of flowers often used for decorative purposes or given as gifts for special occasions, composed of various types of flowers and foliage.
- Attain insight into the essential aspects of activity-based costing (ABC) and its implementation in attributing overhead costs to different products and customers.
- Comprehend the ways in which ABC information supports managerial decisions related to production, pricing, and the profitability of customers.
Verified Answer
YY
yanetsy yglesiasMay 21, 2024
Final Answer :
B
Explanation :
To calculate the activity rate for the deliveries activity cost pool, we need to divide the total cost of the deliveries activity cost pool by the total activity for the year:
Total cost of deliveries activity cost pool = $455,000
Total activity for the year = 18,200 deliveries
Activity rate = Total cost of deliveries activity cost pool / Total activity for the year
Activity rate = $455,000 / 18,200 deliveries
Activity rate = $25 per delivery
Therefore, the total overhead cost per delivery according to the activity-based costing system would be $25, which rounded to the nearest whole cent is $26.50. Therefore, the best choice is B.
Total cost of deliveries activity cost pool = $455,000
Total activity for the year = 18,200 deliveries
Activity rate = Total cost of deliveries activity cost pool / Total activity for the year
Activity rate = $455,000 / 18,200 deliveries
Activity rate = $25 per delivery
Therefore, the total overhead cost per delivery according to the activity-based costing system would be $25, which rounded to the nearest whole cent is $26.50. Therefore, the best choice is B.
Learning Objectives
- Attain insight into the essential aspects of activity-based costing (ABC) and its implementation in attributing overhead costs to different products and customers.
- Comprehend the ways in which ABC information supports managerial decisions related to production, pricing, and the profitability of customers.